Merck & Co beat quarterly profit estimates on Friday as sales of its blockbuster drug Keytruda overtook rival Bristol-Myers Squibb's Opdivo, but that was not enough for investors who expected bigger gains in market share for the cancer therapy.
Shares of the Dow component fell as much as 2.5 per cent, with the company sticking to its decision to keep the animal health unit unlike rival Eli Lilly, which plans to take its unit public.
"They're [Merck] going in the right direction and in the next couple of quarters they are going to gain more market share from Bristol, but maybe it's taking a little longer than expected," Jeff Jonas, a portfolio manager at Gabelli Funds that owns shares of Merck, said.
Keytruda sales surged 89.2 per cent to $1.67 billion (€1.43 billion). Analysts had expected sales of $1.59 billion, according to Credit Suisse.
Both Keytruda and Bristol’s Opdivo work by triggering the immune system to attack tumours but Merck leads in lung cancer treatments, both alone and in combination with chemotherapy.
Animal health
Merck’s total sales rose 5.4 per cent to $10.47 billion.
Merck in the past has called the animal health unit, whose sales rose 14.1 percent to $1.09 billion in the quarter, a “pillar of growth” as it provides diversification away from Keytruda.
"We see animal health still fitting with our strategic intent," chief executive Kenneth Frazier said.
Much before Lilly moved to take its animal health business public, bigger rival Pfizer Inc had done the same with Zoetis Inc five years ago and since then its market value has tripled.
"Many investors had hoped that Lilly's recent announcement would have been the final tipping point to cause Merck to do the same," Brad Loncar, chief executive of Loncar Investments, which runs the Loncar Cancer Immunotherapy ETF, said.
Shares of the company were trading down 1 percent at $63.40 in midday trading. – Reuters
